House prices June 2022

ended 29. June 2022

Tomorrow morning at 07:00, the June Nationwide House Price Index is being published. Handful of Qs for you below. 

  • Where do you expect average prices to be by the end of the year? Up, down, left or right?
  • How were activity levels and demand for resi property in June in your experience (nationally and/or by your area)?
  • What impact are stupidly high inflation and rate rises having on the property market? Cooling demand?
  • Lenders are getting more conservative on affordability - how will this impact people's borrowing power (and prices, in turn)?
  • What poses the main threat to the property market? Rising unemployment, inflation, rate rises?
  • Is the balance of power shifting back to buyers as the economy weakens and stagflation looms?

If you somehow manage to drop a line or phrase from Under Milk Wood into your response, I'll probably pin you. Deadline is midnight tonight.

13 responses from the Newspage community

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Lenders are tightening up on affordability checks, the cost of living has increased sharply and the jobs market is flatlining, which should be a recipe for house prices to tumble. However, this isn't the case, for now at least. What matters is whether inflation is at the peak or still getting warmed up. Also, are interest rates really going to hit 3% in 2023, 4% in 2024 and settle at a beefy but not altogether unthinkable 5% in 2025? The main threat to the property market is not unemployment, inflation or rate rises it is the obsession with prices rising upwards and doomsday predictions of apocalyptic plague like armageddon if they don't. The average price of a new home in Coulsdon, Croydon (zone 6 of London) is now an eye watering £540k with detached properties selling for an average of £770k! With a 10% deposit plus stamp duty first time buyers will need a deposit of £54k and Stamp duty of £17k. That is £71k in cash required to buy an average house in Croydon for a first-time buyer. It's insane. Mortgage affordability is becoming increasingly difficult to achieve for young, first-time buyers due to the dramatic rise in the cost of living. An average salary in the London Borough of Croydon is £35k p/a. In the first-time buyer bracket, this drops to £30k p/a. Without Help to Buy or any other financial assistance, the average first-time buyer can afford to borrow between £120k and £150k which would mean a deposit requirement of £390k! How is this sustainable or achievable? It is likely we will see a big shift towards a New York style 'rent before you buy' model that will see a mass movement of 20-30 something year old first time buyers into build to rent, private rent and co-living schemes completely re-inventing the housing model, market and prices for generations to come.
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I am fully subscribed to the idea of house prices crashing soon. Whether the full crash happens in 2022 or shortly after, I am not sure, but it's coming. Demand in the property market will cool due to painfully high inflation. Inflation is the property market's nemesis. No matter how much money you have in the bank, you are going to feel the current level of inflation and that will hit sentiment hard. I do not think unemployment levels are high enough or predicted to be high enough to have any notable effect on the property market. Lenders becoming more conservative with affordability is sensible in the current climate but of course this will mean people can borrow less, which means sellers may soon have to price lower. Even then people may struggle to purchase properties in the current climate, whether financially, psychologically or both.. Overseas investors who commonly buy properties using cash in the UK will definitely hold a lot of power in the short to medium term.
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We work with borrowers around the UK and still saw a lot of activity in June. Many of these people have been house hunting for a number of months and are only now finding a suitable property. This may point to the fact that there is now less competition with other buyers putting their plans on hold due to the uncertain climate. The main threat to the housing market is the rate at which lenders' fixed deals are increasing right now. Customers we quoted 6 months ago who are now revisiting the idea of buying are now finding that that same mortgage they could have got six months ago is going to cost them hundreds of pounds per month more, which has then priced them out of that purchase. The balance of power between buyers and sellers is certainly shifting, with buyers using fears around the economy as leverage in their offers. This week we had a number of clients' chains nearly collapse at the eleventh hour as a buyer decided they were now overpaying for the property and wanted a huge reduction on the agreed purchase price.
The boiling pot that has been the property market for the past two years is finally reducing to a simmer. The market is beginning to slow and we are seeing lenders up their rates across the board. Expect to see a flurry of first-time buyer activity in the months ahead with the Help to Buy scheme due to end in October, although with lenders tightening affordability it's becoming harder than ever for generation rent to get on the ladder.
At the coalface it certainly isn't slowing down. Lenders are pricing themselves out of being competitive to cope with demand and everyone seems to be just as busy. One area we really are seeing more focus on though is green mortgages, as utility bills become more of a concern for household budgets and research is beginning to identify a pattern that an energy-efficient home is worth around £16,000 more on average. I'd expect that differential to widen as more people want green homes that are cheaper to keep toasty.
House prices are a law unto themselves currently. Economic models suggest they should be heading south, but they stubbornly continue upwards. Great if you are already a homeowner, not so great if you are looking to buy a property. On the mortgage front, we are still seeing lenders drowning in applications, despite them raising rates to try and stem the flow of applications, so activity and demand for mortgages are still very high with only a modest reduction in new enquiries. Affordability models have been tightened up to reflect the increased cost of basic essentials, but so far this hasn't deterred potential customers and they are still able to get the mortgages required, but maybe from different lenders than they would have been able to access before and at slightly higher rates. The one thing I am noticing more of, albeit still not a huge issue, is lenders' surveyors not agreeing with the purchase price of the property. We may get a client who has agreed to pay £250,000 for a house that was marketed at £245000, but then the surveyor comes in and gives a valuation of £240,000. This is likely an indication that surveyors believe we are at the top, or are at least close to the top, of the market.
Property prices are almost certainly going to stabilise by the end of the year with minimal growth, especially with the cost of living rising once again in October. I don't expect any noticeable increase in house prices for the rest of the year but equally I don't expect a material drop either, as activity levels remain fairly strong and demand still outstrips supply. However, demand may cool off now with school holidays coming up for most parents and summer holidays taking priority. The main threat to property prices will be employment levels as the cost of living is already spiralling out of control and a surge in unemployment will put property prices under pressure. For now, the balance of power still favours sellers due to continued demand for housing and an ageing population staying in their homes for longer. Faced with current economic forces, the property market should lie down and lie easy but it doesn't seem to have read the script.
The answer to the direction of house prices may well lie with the Halifax, specifically the fact that they have just increased their exposure to new builds to 95% LTV across the board. Until now, almost every mainstream high street lender would want a minimum of 15% deposit for a new build house. Since Halifax has now reduced the minimum deposit to 5% on new builds, they must think or know something we don't; house prices aren't going anywhere anytime soon. This move by one of the best and most well-respected lenders in the UK should give everyone pause for thought. Moreover, it should give added confidence in the property market, mortgage market and the economy more generally. It opens up thousands of smaller developers and developments to a far greater first-time buyer audience than was possible before and sidesteps requirements to use any weird and wonderful schemes. To me, this move in itself signal things may just be alright. So keep calm, and carry on.
I am expecting house prices to continue to rise over the next 12 months, but almost certainly more gradually than in previous years. Our June figures indicate an increased level of enquiries as well as an increase in mortgage offers, so people are certainly still buying. We are definitely getting more enquiries for support schemes such as Joint Borrower Sole Proprietor or Gifted deposit, as house prices are rising so quickly and wage increases remain stagnant. The bottom line is, people still need places to live, rent is going through the stratosphere, so Mum and Dad are stepping in even more to help their children get onto the property ladder.
I certainly see the market cooling among properties north of £600,000 in North Somerset. However, the right properties valued at the right level will always sell. Unfortunately, vendors have seen the market grow exponentially over the past few years and, more often than not, are asking to list their property at a slightly over-egged asking or guide price. We are seeing valuers down-value properties more often than not, but as a rule anyone who challenges a valuation with strong evidence does tend to turn a valuer's perspective. We are seeing more stock enter the marketplace than we have experienced in the past 12 months, but buyers are now contracting back into their shells a little. The rest of 2022 will be interesting. I certainly do not see the same growth as previous years, perhaps fairly static values and certainly not prices falling....... yet.
At the moment, there's still plenty of buyer interest, but I think It's highly likely house prices will start falling over the next few months. The cost of living and higher mortgage rates will see to that, in my view, even if the government steps in with more short-term help when the energy cap rises again in October. People simply won't be able to borrow as much. The biggest concern is whether Putin will turn off the gas taps to Europe completely. That would make the coming recession several orders of magnitude worse. On the upside, for those with the income, house prices could easily be 10% cheaper in 12-18 months' time.
With such limited supply, the housing market remains robust, but price increases are set to be a lot more modest by the end of the year. Inflation, higher taxes as well as the anticipated October hike in energy prices will dampen demand. Rising mortgage rates have already diminished affordability for many borrowers and this will only get worse as the year progresses. Lenders are already being cautious around affordability and this approach will only become more conservative as the year progresses. The danger of a possible recession or stagflation would of course change the outlook and would shift the balance of power to buyers.
I feel that we are starting to see an element of normality with house prices coming back. There seems to be more properties coming onto the market which in turn means that there are less views per house. The market is still strong but it's looking like we are seeing an end to the craziness of one property getting 20 to 30 views and resulting in a bidding war. Despite the cost of living crisis and the restrictions on affordability I'm still seeing a lot of demand from house buyers and it doesn't seem to have put buyers off up till now so this will help to keep the mortgage market from crashing. I expect by the end of the year we will be on our way to seeing some correction of the boom that happened during Covid. I hope that it's a steady correction so as not to spook the market.